What’s your Competitive Advantage and why Analysis of your competitors is important?
What’s your Competitive Advantage and why Analysis of your competitors is important? Deciding what you are great at doing is one of the most important aspects of any strategic planning. And it’s not how good you are. It’s how much better you are than your competitors.
Suppose you’re competing in a market where you offer the same thing as many of your competitors. The primary way to compete is on price, so you will likely be asked to reduce your prices. But if you can do something different from the others, you will have a say in how much you can charge for your offering. Meaning your prices can likely rise without much of an objection.
Make the most of your Competitive Advantage
So it would help if you determined how you can make the most of your Competitive Advantage. To do this, focus on something that you can deliver your competitors can’t. So, something that will enable you to dominate your niche. For as long as you keep innovating and watch out for new competitors who see the rich pickings you are making the most of. It may be easier to do this in a small market, but if you can dominate it, you will be in an even better position in terms of price and profit. Focusing on your strengths and not following the crowd is counterintuitive but sensible.
How competitor analysis is done
1: Set your analysis goals
2: Define your market
3: Create a list of your direct competitors
4: Conduct secondary and primary research
5: Analyse competitors
6: Summarise competitor product and market strategies
7: Compare and contrast competitors with your products
8: Maintain up to date competitive analysis
Thinking about your strengths, take time to think about what you really do and what you are good at. Yes, you can do as well as anyone in the market at most things. But be fair, there will be things you think are one of your Competitive Advantages, but others can do it better. Yes, you can do it, but you are nowhere near set up to do it as well as them. Analysis of your competitors is fundamental here. You shouldn’t obsess about them, but you should know about them.
An example
Think about a local employment lawyer with five years of experience. Yes, she’ll have similar qualifications as a senior partner of Freshfields Bruckhaus Deringer. But who is better positioned to resolve a multinational’s foreign labour problem? It’s possible the local lawyer could do just an excellent job as Freshfields. But she will not have their experience, support and backup. Also, what happens when the multinational loses the employment case? What defence would their HR director have when questioned why they used a small local lawyer? They would be looking for a new job.
Maybe an extreme example, but hopefully, you get our point. Competitive Advantage isn’t about what you are best at. It’s what you are best at, in relation to the competition. So the questions to ask are:
What can we excel at?
What can I do better than my competitors?
Focusing on the areas you are best at compared to the competition means you will win more battles. You can dominate the market and take your Competitive Advantage.
Where does your advantage come from?
The Advantage may come from a skill you have or a technical speciality. But it may be also be derived from infrastructure or connections. Or perhaps equipment that you have that other people don’t. Or even distribution systems and networks. These things can give you a competitive advantage. And sometimes, you can find a competitive advantage from social connections. From knowing your market intimately. Or having a reputation within a particular community.
You won’t recognise your Competitive Advantage until you acknowledge and know and understand your competitors. So it’s critical to look externally from your business and just focusing on what you are doing yourself.
You need, therefore, to be outward-looking, not just think about your own business. Think about yourself concerning the broader market and the competition out there. A large market may seem attractive at first. But look closer, and you may see a plentiful supply to that market. So, it’s then you realise it’s a buyers market.
But on the other hand, you may be attracted to a smaller market, which may be more profitable for you. If fewer competitors are supplying into that market, it becomes a seller’s market. One you can dominate.
What’s your Competitive Advantage and why Analysis of your competitors is important?
And this is why competitive Advantage is a crucial element for every business. And in every industry. So what’s your Competitive Advantage and why Analysis of your competitors is important?